How to Play the Success of Today’s Hollywood Blockbusters

By George Leong | Small Business

How to Play the Success of Today’s Hollywood BlockbustersThe second installment of The Hunger Games trilogy, Catching Fire, debuted in theaters last Friday to heightened anticipation. The early bet is the film could set a new box office record.

Whether the lofty expectations pan out or not, believe it or not, there is more than one investment opportunity you can take advantage of to make money on the success of The Hunger Games series and other major Hollywood blockbusters.

The company behind the production of The Hunger Games is Lions Gate Entertainment Corp. (NYSE/LGF), which is already up over 100% from its 52-week low and could head higher if the film sets new records, meaning this production company may be an investment opportunity. In addition to films, Lions Gate also produces 28 television shows over 20 networks.

Lions Gate Entertainment Corporation Chart

Chart courtesy of www.StockCharts.com

Fundamentally, Lions Gate has delivered decent results, beating the Thomson Financial consensus earnings-per-share (EPS) estimate in each of the past four quarters, making it a possible investment opportunity. Revenues are estimated to grow 6.4% to $2.93 billion in fiscal 2015 ending in March. Fiscal earnings are estimated to rise 50% to $1.54 per diluted share in fiscal 2015. While the best gains are behind the stock for the time, longer-term, I see Lions Gate as a good investment opportunity.

A second investment opportunity on the success of The Hunger Games series and other blockbusters is IMAX Corporation (NYSE/IMAX). IMAX offers venues in which you can see the film on a specialized 12,000-watt power-packed screen that could be as high as 98 feet. In general, every major blockbuster film is shown on IMAX screens around the world.

There are IMAX screens in North America, Western Europe, Japan, China, and Russia. In all, there are about 767 IMAX theaters in 53 countries as of June 30, 2013. (Source: IMAX Corporation web site, last accessed November 22, 2013.)

The market of China has great potential for IMAX, as it does for many multinational companies, such as Apple Inc. (NASDAQ/AAPL). (See “If Apple Does a Deal with This Company, I’d Buy the Stock.”) At this time, there are about 150 IMAX theaters in China with contracts for 400 additional IMAX theaters to open over the next few years, according to the company. This makes IMAX a possible investment opportunity. IMAX also has a deal to open up more than 120 IMAX theaters in China with China-based Dalian Wanda Group Corporation Ltd., which acquired AMC Theatres in the United States.

IMAX’s revenues are estimated to rise 14% in 2014, according to Thomson Financial. If IMAX can steadily record higher revenue growth, the stock will continue to deliver and provide a sound investment opportunity.

The chart of IMAX below shows a bullish golden cross with the 50-day moving average (MA) trading above the 200-day MA of $22.21, based on my technical analysis. The Fibonacci retracement levels suggest that if IMAX can hold onto its current break at the horizontal resistance line (blue), we could see a move towards $38.00; this would be a great investment opportunity.

Imax Corporation Chart

Chart courtesy of www.StockCharts.com

As an investment opportunity, IMAX could also be helped by short-covering on the stock, as there were 15.82 million shorted shares of IMAX as of October 31, representing 28.1% of the float, according to Thomson Financial.